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Unformatted text preview: The lease transfers ownership to the lessee at the end of the lease term. 2. The lease contains a bargain purchase option 3. The lease term is equal to 75% or more of the estimated economic life of the asset 4. The present value of the lease payments amounts to 90% or more of the fair value of the lease property. If any one is true, it is a capital lease! If none are true, it is an operating lease. For #1 or #2 is true, depreciate over the useful life. Otherwise, depreciate over the lease term. For sale/leaseback, you cannot show a gain at the time of the sale/leaseback. It is amortized over the entire lease. The gain is not shown as a gain at all, but as a reduction in the depreciation expense....
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- Summer '08